Guest Post: Why Becoming a Landlord Was One of the Best Decisions I’ve Made

Hi guys! How is your February going so far? It’s been hectic but mighty festive for us. We celebrated valentine’s and some birthdays.

On the side hustle front, it’s been pretty smooth sailing for us. Passive income really is passive–you literally receive money for doing nothing.* With limited time (there’s only 24 hours in a day) and limited energy, passive income allows you to exponentially grow your cash flow, as Greg and his family does at Club Thrifty. See their inspiring story below.

Arab Street in Singapore

If you’re searching for a terrific way to diversify your income, you might want to consider investing in real estate.

We jumped into rental investments pretty early in our life. While newly married and still in our twenties, in hindsight, it might have been wiser to wait until we’d saved a little more cash. However, it’s worked out great and we’ve never regretted taking the plunge.

About a year after our first rental purchase, we actually converted our personal residence into a rental place. We grew hooked on being landlords, and our investments have turned out to be totally worth it. Here’s why.

Ongoing Rental Income

Once we made that (somewhat painful) initial investment in our first rental property, we began earning more than enough from the rent to cover the mortgage. We use any excess to handle incidental repairs as well for some of our other life expenses.

Being landlords is one way we’ve increased our income for the long haul. By strategically selecting properties in desirable locations, we are practically guaranteed a steady influx of paying tenants. Our month-to-month investment of time and money is minimal; we mainly just watch the mortgage balance decrease while our bank balances grow.

Plus, once the mortgages on both properties are paid in full, the residual income is an added bonus. We plan on keeping these homes for many years, thus increasing our profits.

Rental Growth Potential

We have extra freedom in knowing that rent doesn’t have to stay the same forever. As the landlords, we reserve the right to raise rent as needed. Don’t worry; we’re not ruthless or unreasonable! In fact, on one of our properties, we haven’t raised the rent in almost 10 years. On the other property, we’ve only raised the rent in a way that’s fair to our tenants and reflects the value of the property.

What’s our strategy? First, we keep a constant eye on the rental markets in the area. If the rental prices on our properties seems too low, it might be time to consider an increase. We also use the time between renters to reevaluate our rental fees. This way, we won’t alienate loyal tenants but can ensure our investments continue to be beneficial to us.

Eventual Sale of Property

Another terrific benefit of real estate is that it’s a tangible investment. Homes and properties will always hold value, regardless of what the markets do. If we get tired of maintaining properties or dealing with tenants, we can list the homes and turn a nice profit. We aren’t under any obligation to keep each rental property until the end of time. Real estate values tend to go up, so we’re betting that the rentals we own will be worth a great deal more when we eventually decide to sell.

The idea is, the longer we hang on to our rental properties, the more money we’ll make off their sale. That’s a pretty great feeling. Either we keep making money on the rental income itself, or we sell and enjoy a pile of cash. It’s a win-win situation for us!

Early Mortgage Payoff

One of the biggest financial goals we set for ourselves was to pay off the mortgage on our primary residence years ahead of schedule. We’re motivated by the security of knowing our home is truly ours. Plus, without a mortgage, our monthly expenses will shrink to practically nothing. Instead of thirty years of slavery to house payments, we’re set to finish paying off our home this year. After that, it’s all gravy baby!

Kids’ College Expenses

As parents of two young children, we feel it’s our responsibility to prepare for their college education expenses. Being landlords is one way we’re planning to help them pay for college.

The income we make off our rentals offers us a deeper level of security when it comes to planning for our kids’ future. Once our primary residence is paid off, the extra rental income can go right into college savings plans. Plus, while the kids are actually in college, the rental money will help fund textbooks and other expenses in addition to their tuition.

Retirement Planning

Here’s one of the obvious benefits to investing in real estate: the ability to sock away a decent amount of money for retirement. Saving for our future is an absolute necessity. We won’t need to depend on anyone else to support us as we get older, because we’re saving and investing now. Rental properties play a key role in our retirement plans. And, as I’ve already stated, we can use the rent money to help supplement our income during our retirement, as well.

Exciting Travel Experiences

As a family, we’ve been able to tour some of the most amazing places on the planet. We travel internationally for almost six weeks a year, and being landlords helps finance these trips.

Not only does the money help make all of this travel possible, owning rental property is a super-flexible way to keep our income growing. We can outsource things like minor repairs that might occur while we’re out of town, without cutting too deeply into our revenue.

It’s awesome being able to relax on gorgeous beaches, see historical sites, and teach our kids about diversity through exposure to various cultures. These travel experiences will help shape them into more well-rounded people as they grow, and that’s made possible – in part – through our various income streams.

Final Thoughts

For us, owning rental property is one of the best ways to create diversified income. While it’s not always “easy” money, our rental income keeps flowing in month after month without any required number of hours to work. It’s passive income like this that helps us design the life we want to live – both now and in the future.

Greg Johnson is a personal finance and frugal travel expert who leveraged his online business to quit his 9-5 job, spend more time with his family, and travel the world. He is the co-owner of the popular blog Club Thrifty, where he teaches others how to spend less and travel more.

*As a caveat, passive income does have its barriers to entry. You need a large capital outlay upfront. Your money gets tied up in an illiquid asset. There’s also the risk of not getting as high a return as expected (if at all).